It seems like much more time has passed since the logistics system was put to the test during the pandemic paralysis. Trucks and delivery vehicles were the ones that continued to supply the population while waiting for the saving vaccine. What was an unprecedented drop in activity (-9.8% in 2020) also unambiguously recovered the following year (+10.5%) but in the meantime transport companies suffered that swing. Today they are debating against old acquaintances, but with new characteristics: inflation. An Argentine custom that today is the main issue of concern for operators in the sector around the world.
price pandemic. The cost structure of the sector varies depending on whether it is the medium and long distance section or the urban supply. In the first, the fuel (generally diesel) and the tires have more weight. On the other hand, in the second the salary factor weighs more. According to a recent report by the prestigious international consultancy McKinsey“the trend is spilling over into all corners of the global economy with dramatic effects”.
The sector in Argentina, very accustomed to dealing with changing prices and with a union with negotiating strength (Truckers), the post-pandemic recovery broke all forecasts. Since last January, the index that produces FADEEAC (Federation. Argentina of Freight Trucking Business Entities) grew 82.1%, against 67% of retail inflation. However, this average shows very different behaviors among the items that grew the least (tolls, with 29% and the financial cost, with 253%. But the three most relevant and that exceed the FADEEAC index by more than 20 points are tires (+105%), rolling stock (+104%) and insurance (+96%).
Each of them has a particular story. In the case of tyres, the recent long and intense union conflict highlighted a problem that transport had been facing for some time. “The price of this input has been rising above inflation for four years and has recently been aggravated by the lack”, points emilio felcman, Director of Economic Studies at FADEEAC. The combination of obstacles to importing and the shortage of supplies due to the virtual paralysis of the three production plants pushed prices even higher, which according to Felcman did not follow an international pattern.
In the case of rolling stock, the stocks are added to the same difficulties experienced by local producers to “fit” their units due to the situation. Finally, insurance showed a gap that could widen if a higher accident rate is ratified due to the same difficulties in keeping the teams in shape.
The fuel factor, on the other hand, was not out of tune with the general index, but as of this month of October the Government authorized higher increases in its price that began with an update of the tax. Everything indicates that from now on it will be in the items that will increase the most and represents almost a third of the total costs.
Future. For Paul Gunningexecutive director of FAETYL Argentine Federation of Transport and Logistics Entities, the sector over the last two years has been experiencing a “perfect storm”, in which the following were combined: “the pandemic (it was necessary to invest in security and logistics), lack of fuel, that of tires (which has been going on for a year and a half) and a collective bargaining process that is in full swing”, he stresses.
The parity, closed until September with a 31% semi-annual rate (71% annualized) would increase according to the aspirations stated by the trucker leader Pablo Moyano in an additional 100%. The direct sum is for the tribune, the truth is that, if they finally close around 100% for the year that begins in November, it will be aligned with what the main consultants dump in the REM survey that disseminates the central bank. Can that percentage be transferred to the price of the service? Gunning clarifies that it will depend on the market situation of each company: “salary is not the only cost item and that will hit differently depending on which segment each one is in,” he explains. In addition, in his opinion, to keep up with the Costs should be able to update prices, but the economy is not in a favorable situation to lose a customer, so there is increasing cost pressure and a lower profit margin. On the subject of tires, the solution is not simple because the truck manufacturer “forces you to use a specific model and also has an impact on insurance. If it cannot be fulfilled: either fewer trips are made or another type of operational output and it impacts the entire cost of the service due to a greater incidence of fixed costs”, he details. “All this revolves around an inflationary problem and the lack of resources to acquire goods abroad. We have been through crises even during the pandemic and there were more serious problems after the pandemic than in it”, he concludes.
The challenge facing the sector is multiple. Added to the already mentioned pressure of costs and shortages is a substantive change in demand that is becoming apparent as an irreversible long-term trend. The explosion of e-commerce since the pandemic and the adoption of new flexible formats in contracting or what is the reconversion of mobility, increasingly valued by the system and customers. “We already have operators that do the last mile with electric vehicles (in water distribution or packages, for example) driven by the brutal change in the consumer profile”, Gunning concludes. A new scenario or “demand pressure”?? The parity with the Moyano could be a game next to this captivating horizon.
